All Free Accounting MCQs with Answers

• A. 30 June
• B. 31 March
• C. 31 December
• D. 30 September

Explanation: Pakistan's ordinary tax year is the twelve-month period ending on 30 June.

• A. Output tax is charged at zero, with input credit generally available
• B. Output tax is charged at the standard rate, with no input credit
• C. The supply is outside the scope of every tax law
• D. The supply is exempt, so related input tax is always refundable

Explanation: A zero-rated supply has a tax rate of zero, but the registered supplier can generally claim related input tax subject to the law.

• A. The person who ultimately bears the economic burden
• B. The date on which the tax return is submitted
• C. The authority that collects the tax
• D. The legal document used to calculate tax

Explanation: Tax incidence refers to who finally bears the economic cost of a tax, which may differ from the person legally required to pay it.

• A. A withholding agent
• B. A tax appellate authority
• C. A registered sales tax supplier
• D. A tax audit tribunal

Explanation: An employer that deducts tax from salary and remits it to the government acts as a withholding agent.

• A. The allocation of an asset's cost over its useful life
• B. The immediate recovery of all cash paid for an asset
• C. The increase in market value of a business asset
• D. The repayment of a business owner's personal loan

Explanation: Depreciation allocates the cost of a qualifying depreciable asset over the period in which it is used to earn income.

• A. Capital gain
• B. Employment income
• C. Dividend income
• D. Royalty income

Explanation: A capital gain generally arises when a capital asset is disposed of for an amount exceeding its relevant cost, subject to applicable…

• A. Verify the accuracy of reported income and deductions
• B. Replace every taxpayer's return with a fixed estimate
• C. Convert an indirect tax into a direct tax
• D. Grant an automatic exemption from future tax

Explanation: A tax audit examines books, documents and other evidence to check whether income, deductions and tax calculations are properly reported.

• A. Its taxable output tax exceeds allowable input tax
• B. Its allowable input tax exceeds taxable output tax
• C. It has only exempt purchases and no sales
• D. It records a business loss regardless of sales tax figures

Explanation: Net sales tax is generally determined by comparing output tax with allowable input tax.

• A. To reduce the income on which tax is calculated
• B. To increase the taxpayer's gross receipts
• C. To convert taxable income into sales tax
• D. To eliminate the need to file a return

Explanation: An allowable deduction is subtracted in determining taxable income, so it normally reduces the base on which income tax is calculated.

• A. Filing an appeal under the applicable tax law
• B. Cancelling all supporting accounting records
• C. Treating the assessment as a private business expense
• D. Charging the disputed amount as sales tax on customers

Explanation: Tax laws provide an appeal mechanism through which a taxpayer may challenge an assessment before the relevant appellate authority.

• A. Progressive tax
• B. Regressive tax
• C. Proportional tax
• D. Degressive tax

Explanation: A proportional tax applies one constant rate to the tax base, regardless of the taxpayer's income level.

• A. The amount on which tax is calculated
• B. The date on which tax becomes due
• C. The authority that collects the tax
• D. The penalty imposed for late payment

Explanation: The tax base is the income, value, transaction, or other measurable amount to which a tax rate is applied.

• A. State Bank of Pakistan
• B. Federal Board of Revenue
• C. Securities and Exchange Commission
• D. Pakistan Bureau of Statistics

Explanation: The Federal Board of Revenue administers major federal taxes, including income tax and federal sales tax.

• A. To record the owner's capital
• B. To document the supply and tax charged
• C. To request a tax exemption
• D. To replace the annual tax return

Explanation: A tax invoice records the taxable supply, its value, and the sales tax charged to the purchaser.

• A. A business sale of non-exempt goods for consideration
• B. A private gift with no business connection
• C. A transfer of personal belongings without payment
• D. An exempt transaction specifically excluded by law

Explanation: A business sale of non-exempt goods for consideration generally meets the basic conditions of a taxable supply.

• A. The taxpayer, through the filed return
• B. The court, through a judgment
• C. The bank, through the account statement
• D. The auditor, before any return is filed

Explanation: In self-assessment, the taxpayer computes income, deductions, and tax and reports them in the return.

• A. Customs duty
• B. Property tax
• C. Payroll tax
• D. Capital gains tax

Explanation: Customs duty is commonly charged on imported goods as they enter a country.

• A. Whether a person may open a bank account
• B. The scope of income subject to taxation
• C. The market price of imported goods
• D. The accounting method used by a company

Explanation: Tax residence commonly helps determine whether a person is taxed on worldwide income or mainly on income from sources within the country.

• A. It increases the later year's taxable income
• B. It may reduce later taxable income under applicable rules
• C. It permanently cancels every tax liability
• D. It converts income tax into sales tax

Explanation: A permitted carried-forward loss can generally be set against qualifying future income, reducing taxable income in a later period.

• A. Tax paid before the final liability is determined
• B. Tax charged only after a tax audit
• C. Tax imposed on imported machinery
• D. Tax refunded before income is earned

Explanation: Advance tax is paid during or before the relevant tax period on the basis of expected or estimated liability.